Penney sales plunge as shoppers spurn pricing strategy

By Phil Wahba

Published November 09, 2012

Reuters

J.C. Penney Co Inc reported a sharper-than-expected decline in quarterly sales at stores open at least a year as shoppers continued to snub the retailer after it got rid of most coupons and sales earlier this year.

The company, which is in the early stages of a multiyear turnaround, said on Friday that same-store sales had fallen 26.1 percent, while analysts had expected a decrease of 17.9 percent. Shares of the department store chain dropped 7 percent to $20.18 in premarket trading.

Penney has eliminated most coupons and sales events and plans to transform about 700 of its 1,100 stores into a collection of 100 boutiques, such as Levi's Denim Bar, by 2015.

There have been signs that the first few shops, which also include Izod and Liz Claiborne, have won over customers, but they still only represent a small fraction of sales.

Penney customers, who are more price-sensitive than those at Macy's Inc , have balked at the absence of coupons, and the sharp drop in visits by shoppers has decimated sales in the three quarters since the strategy was put in place in February.

In a statement, Chief Executive Officer Ron Johnson, who took the reins a year ago and is the architect of the turnaround, said this was a "tale of two companies," with the old Penney still struggling and the new stores "surpassing" his expectations.